In light of current proposals to reduce the federal deficit, the Kaiser Family Foundation (KFF) released a primer on Medicare cost trends and program characteristics.  The brief outlines Medicare spending trends, explaining how the program is financed and which factors contribute to its growth.  The authors determined that 47 million individuals were enrolled in Medicare in FY2010.  The brief also found that Medicare spending totaled $524 billion in FY2010, or 15 percent of all federal outlays.  By 2020, the authors project that Medicare will account for 17 percent of federal outlays and 4 percent of gross domestic product (GDP).

From the report:

For 45 years, Medicare has successfully provided access to health care services for the elderly ages 65 and over and many nonelderly people with disabilities, and currently covers 47 million Americans. Persistently high rates of growth in national health expenditures combined with demographic trends, however, pose a serious challenge to the financing of Medicare in the 21st century. This paper provides a detailed overview of Medicare spending and financing, beginning with a review of the factors contributing to the growth in Medicare spending, including the effects of the 2010 health reform law. Next, it explains the structure of the Medicare program’s financing, reviews various measures of fiscal status, and discusses the expected effects of rising Medicare costs on beneficiaries. The paper concludes with a discussion of the program’s long-run financial challenges.

Full Report: Medicare Spending and Financing: A primer (PDF | 2.24 MB) 

Kaiser Family Foundation. (2011). Medicare spending and financing: a primer. Potetz, L., Cubanski, J and Neuman, T.